The company demonstrated PCs and servers running its upcoming Penryn family of chips this week during a briefing for the press and analysts on its for the 45-nanometer generation. Penryn is the code name for a family of desktop, notebook and server chips based on Intel's Core microarchitecture, and systems with the chips will be available before the end of this year, said CEO Paul Otellini at the event.

Penryn chips will come with the SSE4 instructions Intel announced at the Intel Developer Forum in September, said Stephen Smith, vice president and director of desktop platform operations. Smith called the new instructions "the biggest change to our instruction set in about five years," and said they improve the performance of multimedia applications and technical computing.

The Penryn chips are the first iteration of the new manufacturing strategy outlined by Otellini earlier this year. Intel wants to introduce new chip microarchitectures and manufacturing technologies on a regular two-year cadence, which the company refers to as the "tick-tock" strategy.

Penryn is essentially a shrink of the Core 2 Duo chips, with a few extras like the SSE4 instructions. It's being introduced along with the new manufacturing technology, the "tick" of Intel's plans. Then next year, when the 45-nanometer manufacturing technology is mature, Intel will introduce a new chip microarchitecture code-named Nehalem--the "tock"--with more significant changes to the chip design.

The rapid cadence is designed to ensure Intel won't get fooled again. Advanced Micro Devices caught Intel off guard earlier this decade, introducing a new chip architecture that represented a significant improvement in performance and power efficiency over Intel's chips at the time. Intel would like to avoid having to scrap years of planning again, so it is making smaller changes to its chip blueprints on a more frequent basis to keep up with the times.

The tide has started to turn back in Intel's favor with the Core 2 Duo chips. But one area where Intel has never fallen behind AMD is chip manufacturing.

Intel has been shipping chips based on its 65-nanometer manufacturing technology since late 2005, while AMD just last month introduced its first 65-nanometer chips. If Intel successfully introduces the Penryn family, it will have 45-nanometer chips out well before AMD's planned 2008 rollout of similar chips.

Smaller transistors have lots of benefits. Chip makers can improve performance by putting more transistors on the same size chip and dial-down power consumption by getting more work done. There's an economic upside as well, in that the chips themselves can be made smaller. This allows Intel and AMD to cut more chips from a single silicon wafer, reducing the cost to build an individual chip and making investors happy with fatter profit margins.

AMD has outlined plans to try to catch up to Intel, vowing to introduce its own 45-nanometer chips 18 months after its 65-nanometer chips, instead of the usual two years. Intel's Penryn demonstration puts additional pressure on that transition.